U.S. Senators Demand Answers from Wells Fargo on Military Lending

WASHINGTON, DC – Seeking to protect military families and active duty military
personnel whose consumer rights may have been violated by Wells Fargo, a group of
eleven U.S. Senators led by Jack Reed (D-RI), the Ranking Member of the Armed
Services Committee, Richard Blumenthal (D-CT), the Ranking Member of the Veterans’
Affairs Committee, and Sherrod Brown (D-OH), the Ranking Member of the Banking
Committee, are calling on Wells Fargo to step up compliance with the Servicemembers
Civil Relief Act (SCRA).

The letter comes on the heels of Wells Fargo being fined a total of $24.1 million by
the U.S. Department of Justice and the Office of the Comptroller of the Currency
(OCC) for the bank’s alleged violations of the SCRA. The SCRA was designed to ease
financial burdens on servicemembers during periods of military service. For
example, the SCRA includes provisions that prohibit the eviction of military members
and their dependents from rental or mortgaged property, and the law caps interest at
6% on debts incurred prior to an individual entering active duty military service.
In addition, under the SCRA, a court order is required before repossessing a vehicle
belonging to a member of the military, if the servicemember took out the loan and
made a payment before entering military service.

«We are extremely disappointed to learn of the SCRA announcement. Combined, these
abuses indicate that Wells Fargo has actually made it more difficult and stressful
for our service members and their families by violating the very rights they have
fought and continue to fight so hard to secure. We are also concerned about
potential compliance issues related to the Military Lending Act (MLA), including new
rules that took effect on October 3,» the Senators wrote to Wells Fargo CEO John
Strumpf and members of the Board of Directors.

The letter was signed by U.S. Senators Jack Reed (D-RI), Richard Blumenthal (D-CT),
Sherrod Brown (D-OH), Chuck Schumer (D-NY), Dick Durbin (D-IL), Patty Murray (D-WA),
Maize Hirono (D-HI), Bob Menendez (D-NJ), Jeff Merkley (D-OR), Elizabeth Warren
(D-MA), and Bernie Sanders (D-VT).

The Senators demanded answers to several questions, including:

1. On what date did you first become aware of the most recent SCRA
violations at Wells Fargo? Upon becoming aware of these violations, what did you
specifically do to remedy these violations? When was the Board of Directors first
made aware of Wells Fargo’s SCRA violations? What specifically did the Board of
Directors recommend in terms of remedial actions?

2. With respect to the fraudulent accounts opened by Wells Fargo employees,
how many concerned military members, either active duty or reserve?

3. Since the SCRA was enacted in 2003, how many times has Wells Fargo
violated the SCRA? For each violation, please describe the nature of the violation,
the number of service members harmed, the financial harm imposed upon service
members, the fine, penalty, or other remedy assessed, and whether Wells Fargo
deducted any cost associated with these remedies from Wells Fargo’s tax returns. If
such a deduction was taken, please disclose the financial value of each such tax
deduction.

4. For each Wells Fargo branch located on the premises of a U.S. military
base, please provide the following information:

o The branch address and number of customers served;
o Since the opening of the branch, the revenue generated by each branch;
o The annual cost of the branch’s lease, including a fair market estimate
for what a comparable lease would cost if the branch were located immediately off
base;
o The number of unauthorized accounts or credit cards that were opened or
issued;
o Whether any of the 5,300 terminated employees were employed at one of
these branches;
o The cross-selling goals set for employees, including a list and a
description of the various Wells Fargo products that could satisfy such
cross-selling goals; and
o Whether there have been any other violations of local, state, or federal
law at such branches and a description of how those violations were remedied.

5. In light of these SCRA violations, please explain why Wells Fargo should
be allowed to keep its branches on U.S. military bases?

A copy of the letter follows:

October 6, 2016

John G. Stumpf
Chairman and Chief Executive Officer
Wells Fargo and Company
420 Montgomery Street
San Francisco, CA 94163

Dear Mr. Stumpf:

We write to question Wells Fargo’s commitment to the well-being of our service
members based on Wells Fargo’s inability to ensure compliance with the
Servicemembers Civil Relief Act (SCRA).

As you may be aware, our country has a strong tradition of ensuring our service
members are protected while they sacrifice to keep our nation safe. Building on
such efforts, Congress passed the Soldiers’ and Sailors’ Civil Relief Act as World
War II escalated to provide crucial financial protections for service members to
«enable such persons to devote their entire energy to the defense needs of the
Nation.» Now called the SCRA, this law includes such protections as prohibiting the
eviction of service members and their dependents from rental or mortgaged properties
and capping interest at 6 percent on debts incurred prior to an individual entering
active duty military service.

Indeed, Wells Fargo acknowledges the importance of the SCRA on its web-site by
stating «Wells Fargo appreciates the service of America’s military personnel. That’s
why we offer expanded mortgage benefits that go beyond what the SCRA requires.» It
appears to us that rather than going beyond what the SCRA requires, Wells Fargo has
systematically, over the past ten years, failed to live up to the basic requirements
of the statute.

On September 29, 2016, Wells Fargo settled with the Justice Department (DOJ) for
«$4.1 million to resolve allegations that it violated the SCRA by repossessing 413
cars owned by protected service members without obtaining a court order.» Related
to the DOJ settlement, Wells Fargo paid a $20 million penalty to the Comptroller of
the Currency (OCC) because it «found that between approximately 2006 and 2016,
[Wells Fargo] violated three separate provisions of the SCRA.» This is not Wells
Fargo’s first SCRA violation. In 2012, Wells Fargo settled with the Federal
Government and State Attorneys General from across the country for foreclosure
violations including violations of the SCRA. Wells Fargo alone agreed to distribute
$87.7 million to 720 eligible service members. These serious violations contradict
Wells Fargo’s claim that it values our service members. Indeed, these violations
undermine the financial readiness of our troops, making it more difficult for them
to devote their full energy to their military service and the Nation’s defense.

Considering the settlements announced on September 8th against Wells Fargo by the
OCC, Consumer Financial Protection Bureau, and the City of Los Angeles for opening
unauthorized deposit and credit card accounts for your customers, we are extremely
disappointed to learn of the SCRA announcement. Combined, these abuses indicate
that Wells Fargo has actually made it more difficult and stressful for our service
members and their families by violating the very rights they have fought and
continue to fight so hard to secure. We are also concerned about potential
compliance issues related to the Military Lending Act (MLA), including new rules
that took effect on October 3. Given these troubling developments, we would
appreciate answers to the following questions:

1. On what date did you first become aware of the most recent SCRA
violations at Wells Fargo? Upon becoming aware of these violations, what did you
specifically do to remedy these violations? When was the Board of Directors first
made aware of Wells Fargo’s SCRA violations? What specifically did the Board of
Directors recommend in terms of remedial actions?

2. With respect to the fraudulent accounts opened by Wells Fargo employees,
how many concerned military members, either active duty or reserve?

3. Since the SCRA was enacted in 2003, how many times has Wells Fargo
violated the SCRA? For each violation, please describe the nature of the violation,
the number of service members harmed, the financial harm imposed upon service
members, the fine, penalty, or other remedy assessed, and whether Wells Fargo
deducted any cost associated with these remedies from Wells Fargo’s tax returns. If
such a deduction was taken, please disclose the financial value of each such tax
deduction.

4. For each Wells Fargo branch located on the premises of a U.S. military
base, please provide the following information:

o The branch address and number of customers served;
o Since the opening of the branch, the revenue generated by each branch;
o The annual cost of the branch’s lease, including a fair market estimate
for what a comparable lease would cost if the branch were located immediately off
base;
o The number of unauthorized accounts or credit cards that were opened or
issued;
o Whether any of the 5,300 terminated employees were employed at one of
these branches;
o The cross-selling goals set for employees, including a list and a
description of the various Wells Fargo products that could satisfy such
cross-selling goals; and
o Whether there have been any other violations of local, state, or federal
law at such branches and a description of how those violations were remedied.

5. In light of these SCRA violations, please explain why Wells Fargo should
be allowed to keep its branches on U.S. military bases.

6. In light of these SCRA violations, is Wells Fargo in compliance with the
MLA, which caps the annual interest rates for consumer credit to service members and
their dependents at 36%?

7. At Wells Fargo, who is ultimately responsible for the bank’s compliance
with SCRA and the MLA? Please describe in detail how this person or these persons
have taken responsibility for Wells Fargo’s multiple SCRA violations.

8. Have you taken personal responsibility for Wells Fargo’s SCRA violations?
If so, please explain how.

We would appreciate a response by October 27, 2016.

Sincerely,

Reed
Blumenthal
Brown
Schumer
Durbin
Murray
Hirono
Menendez
Merkley
Warren
Sanders